NEW YORK — When General Motors finally offers stock to the public today, small investors probably will be left out. Pension funds, mutual funds and other big institutions want a piece of the rehabilitated automaker. That means the three dozen banks divvying up the new shares may not have much left for individual investors.
And being left out of the initial public offering can mean being left out of some big profits: Shares of newly public companies sometimes jump 10 percent or more on the first day of trading, handing easy money to those lucky enough to get access at the offering price.
“Wall Street is only begrudgingly involving individual investors,” lamented David Menlow of research company .
The most important rule: The banks handling IPOs — called underwriters — get to pick who gets the shares at the offering price. And critics say those shares often go to favored clients or potential clients — that is, institutions that pay lots of trading commissions to the banks, not the small fry. The Associated Press; AP file photo
